Interest builds for $1bn Aveo retirement village portfolio

Aveo Springfield, part of the retirement home boom.

The world’s largest private equity players, including US groups Cerberus Capital Management and Blackstone, are in the race for Aveo Group’s $1 billion retirement village portfolio but investor hopes of a premium may not be realised.

Aveo shares have rocketed since its results, when company chief executive Geoff Grady revealed offers for the company had come in ahead of its trading price. The shares have since broken the $2 barrier after being stuck around $1.50 at the start of 2019 as worries about the slowing residential market clouded its outlook.

The shares received a boost when JPMorgan analysts said there was a “strong likelihood” of a $2.50 to $3 cash bid in the next two to three months.

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Analysts say a number of bidders have submitted indicative non-binding offers and a short list is being established with second-stage due diligence to commence shortly.

Brookfield is also rumoured to be showing interest.

Aveo’s independent board committee, advised by Merrill Lynch, is assessing a number of indicative non-binding offers and the short-listed parties will proceed to due diligence before trying to negotiate final bids.

The Australian has learnt offers are likely to reflect a discount to the company’s valuation of its retirement portfolio, which has been hit by the sluggish residential market as well as a build-up of stock.

But the preferred party will have to offer a price that satisfies the independent board committee and 24% shareholder Mulpha, which could still make its own move to privatise the company if bids come in too low. Another scenario could see Mulpha exit its holding, although observers suggested a joint venture with a leading party was more likely.

“We believe any offer would be via scheme of arrangement and would likely be made between late March and early May,” JPMorgan says.

Cerberus is one of the world’s largest real estate platforms and invests in value plays around the world. It has a $US35 billion empire and closed its $US1.8 billion fourth global opportunistic fund last year, taking its capacity to more than $US8 billion for real estate-related plays.

Blackstone is among the country’s biggest investors and previously backed retirement group NLV alongside Navis, before it sold out to Singapore’s GIC and Tasman Capital Partners last year.

This article originally appeared on www.theaustralian.com.au/property.